Portugal’s downgrade to junk may
stifle corporate bond sales in Europe, killing off a mini-
revival in issuance spurred by investor optimism about Greece’s
efforts to avoid default.

“The primary window has almost slammed shut just as
spectacularly as it had flung open,” said Suki Mann, senior
credit strategist at Societe Generale SA in London.

Notes sold by Enel SpA (ENEL), Italy’s largest power operator, and
Fiat SpA (F) fell in their first day of trading today, while two
issuers pulled deals. Enel and Fiat led 5.4 billion euros ($7.7
billion) of company bond sales in Europe this week, the biggest
round of issuance by non-financial borrowers since May,
according to data compiled by Bloomberg.

Corporate bond sales plunged to 23 billion euros in June, a
third of the amount raised in May, amid investor concern that
Greece’s debt crisis would spread through Europe. Portugal,
which followed Greece and Ireland in seeking a bailout for its
budget shortfall, was cut four levels to Ba2 by Moody’s
Investors Service yesterday.

Enel, Fiat

Rome-based Enel raised 1.75 billion euros from a sale of
bonds due in six and 10 years, data compiled by Bloomberg show.
The 750 million euros of longer-dated notes fell to 99.22 cents
on the euro after being sold at 99.47, BNP Paribas SA prices on
Bloomberg show.

Fiat in Turin, Italy, sold 1.5 billion euros of three- and
seven-year bonds. The seven-year securities dropped to 99.38
cents on the euro from their issue price of 100, BNP Paribas
prices show.

“Enel and Fiat sit in the peripherals category and so are
under pressure for obvious reasons,” SocGen’s Mann said.

Portugal may be shut out of financial markets beyond 2013
and possibly need a second bailout, Moody’s said. The country’s
government has to implement an austerity plan as a condition of
the 78 billion-euro aid package from the European Union and the
International Monetary Fund.

Portugal’s bonds slid after the Moody’s downgrade, sending
10-year yields to a record. Other debt-strapped euro nations
fell with Spanish securities dropping for a third day and
Italian 10-year yields jumping to the highest since 2008.

Bayerische Landesbank, a Munich-based lender, postponed a
sale of 10-year covered bonds, according to a company spokesman.
The delay followed a Moody’s report published today that put
covered bonds of German Landesbanks, including BayernLB, on
review for downgrade. Covered bonds are securities backed by
mortgages or public-sector loans and guaranteed by the issuer.

Toll-road operator Autoroutes du Sud de la France pulled
its 500 million-euro sale of seven-year bonds because of
worsening market conditions today, according to two people with
knowledge of the matter. A spokesman couldn’t immediately be
reached for comment.